McDonald's CEO's firing reflects rising scrutiny of work relationships

David Yaffe-Bellany, The New York Times

Posted at Nov 05 2019 12:02 PM

McDonald's CEO Steve Easterbrook demonstrates how ordering is done at a self serve kiosk before a press conference in New York Nov. 17, 2016. Shannon Stapleton, Reuters

The #MeToo era has brought new scrutiny to a wide range of workplace misconduct — from discrimination to sexual harassment to assault — that was ignored, tolerated or even covered up in some corners of corporate America.

Now, the abrupt firing of McDonald’s chief executive, Steve Easterbrook, over the weekend highlights how even consensual relationships between managers and subordinates are drawing greater scrutiny.

Many of the circumstances of Easterbrook’s dismissal remain unclear, but McDonald’s said Sunday that its board had determined he engaged in a relationship that violated company policy. Its standards of business conduct prohibit employees with “a direct or indirect reporting relationship” from “dating or having a sexual relationship.”

“It is not appropriate to show favoritism or make business decisions based on emotions or friendships rather than on the best interests of the company,” the policy states.

In a regulatory filing Monday, McDonald’s said Easterbrook would receive 6 months of severance pay. That is likely to be around $675,000, or about half his base salary last year, according to the company’s 2018 severance guidelines. In the coming years, however, he stands to receive a total of more than $40 million in compensation, including stock options, according to an estimate by Equilar, an executive compensation consulting firm.

The mere fact that a successful executive was fired because of what McDonald’s described as a “recent consensual relationship” reflects changing attitudes about romance in the workplace, employment lawyers and other experts said.

“It’s a sign of the times,” said Wendy Patrick, a business ethics lecturer at San Diego State University. “You’re under a microscope in a way today that you never were before, simply because our awareness has been raised as to the problems that could potentially cause.”

Those problems include conflicts of interest, as well as the potential for a relationship that ends badly to result in harassment and retaliation.

Since announcing the leadership change on Sunday afternoon, McDonald’s has declined to reveal further details about Easterbrook’s relationship, including the employee’s position in the company, how the board found out about the relationship and how long it had lasted.

On Monday, McDonald’s human-resources chief, David Fairhurst, left the company. A spokeswoman for the fast-food chain wouldn’t say if the exit was linked to the investigation into Easterbrook’s relationship.

In recent years, other companies have taken similar actions penalizing workplace relationships. Last year, Intel’s chief executive, Brian Krzanich, resigned after the company discovered that he’d had a relationship with an employee — a violation of Intel’s “non-fraternization policy,” which applies to all managers.

“There has been a definite trend in the direction of written policies prohibiting romantic relationships between executives and their subordinates,” said Mark Spund, an employment lawyer in New York.

The policies can take a variety of forms. For example, many companies permit mid-level managers to have relationships with employees as long as they report the relationship. The rules for executives tend to be stricter.

“Companies in the aftermath of #MeToo have really understood that there’s an inherent power differential and what’s perceived to be consensual in the eyes of the executive may not be with the subordinate,” said Debra Katz, an employment attorney in Washington who has dealt extensively with workplace sexual harassment.

Still, sensitivity about workplace relationships — especially those involving a power imbalance — existed long before the #MeToo movement focused national attention on the misbehavior of men in power, shaking the entertainment, media and technology industries, among many others. In 2012, Best Buy’s chief executive, Brian Dunn, resigned after engaging in what the company described as “an extremely close personal relationship with a female employee.”

Both Dunn and the employee claimed that the relationship was not romantic. But an investigation by Best Buy found that Dunn had given the employee tickets to sporting events and concerts and that the pair had exchanged numerous phone calls and texts, some of which contained “messages expressing affection.”

And in 2005, Boeing’s chief executive, Harry Stonecipher, was forced to resign after he had a relationship with an employee.

The decision to fire Easterbrook may also reflect the specific pressures facing McDonald’s, which has been criticized recently for sexual harassment at the franchise level. Several Democratic presidential candidates this year have joined striking workers in demanding better protection from harassment, as well as union rights and a $15 minimum wage.

McDonald’s may want to “send a message to their employees that any kind of power-driven relationship is out of bounds,” said Eric Schiffer, an expert on reputation management.

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